With amendment upon amendment of some on the UK’s legislation recently, it is easy to understand why some organisations are confused about which verison of the regulations they should be following. A classic example is the The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (MLR17) which implemented the EU’s money laundering directive into UK law and is the UK’s current legislation for money laundering.
Amended Versions To Date
In 2019, a number of amendments were decided upon for the MLR17 to implement the 4MLD/5MLD changes to the EU directive, meaning that the Money Laundering and Terrorist Financing (Amendment) Regulations 2019 came into force on 10 January 2020, introducing a new document to be read alongside the existing MLR17.
In October 2020, in preparation for the end of the Brexit transition period, the UK government implemented the Money Laundering and Terrorist Financing (Amendment) (EU Exit) Regulations 2020 which is a statutory instrument that updates the existing money laundering legislation MLR17 (and 2019 amendments).(EU Exit) Regulations 2020
An example of the amendments that span all 3 legislative documents: –
- MLR17 – Pt 3. Chpt 1. (28) ends at clause 18(b)
- MLR19 – Clause 19 inserted: (19) Information may be regarded as obtained from a reliable source which is independent of the person whose identity is being verified where: –
(a) it is obtained by means of an electronic identification process; and
(b) that process is secure from fraud and misuse and capable of providing an appropriate level of assurance that the person claiming a particular identity is in fact the person with that identity
- MLR20 – 19(b) is further amended: the words “an appropriate level of assurance” is changed to “assurance that the person claiming a particular identity is in fact the person with that identity, to a degree that is necessary for effectively managing and mitigating any risks of money laundering and terrorist financing”
Whilst some of the changes may seem minor, following an outdated version of any regulation can pose serious issues for organisations who may think they have adequate controls and processes in place to meet the legislative requirements, but are in fact missing key tools and requirements.
In the above example, customer due diligence is an essential part of preventing and monitoring money laundering and ensuring that identities are accurately and adequately verified is mandatory.
The 2020 (EU EXIT) instrument implemented further changes, some of which came into force on 6th October 2020. These include (but are not limited to):-
- 28.(19b) Customer Due Diligence -an appropriate level of assurance’ has been amended to ‘assurance that the person claiming a particular identity is in fact the person with that identity, to a degree that is necessary for effectively managing and mitigating any risks of money laundering and terrorist financing’
- 33.(4a) Enhanced Due Diligence – regarding the provision of a life insurance policy, the relevant person must
consider the nature and identity of the beneficiary of the policy when assessing whether there is a high risk of money laundering or terrorist financing, and the extent of the measures which should be taken to manage and mitigate that risk
- 33.(4b) Where the beneficiary of a life insurance policy provided by a relevant person is a legal person or a legal arrangement, and presents a high risk of money laundering or terrorist financing, the relevant person must take reasonable measures to identify and verify the identity of the beneficial owner of that beneficiary before any payment is made under the policy
Changes which come into force on the 6th April 2021 relates to when trust information must be provided to the Commissioners for inclusion on the register of beneficial ownership and providing for additional trusts to be included on the register.
Changes coming into force on the 10th March 2022 extends Regulation 30A (requirement to report discrepancies in registers) to include express trusts as well as companies.